Development Watch – Week #4 Aug ’24

Development News

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AI to boost Quality of Life in Rural India

Innovation, investments and institutional push in human capital is needed to narrow urban-rural inequality, as per Transform Rural India. The vision of Viksit Bharat will require India to sustain growth at 8% annually. New age technologies like AI have potential to change the situation WRT employment generation and quality of life. New technologies can provide an opportunity within National Education Policy (NEP) framework to focus on vocational, entrepreneurship, digital and AI literacy to open up new possibilities. In last couple of years, rural areas have outpaced urban ones. This is mainly due to higher government spending, on massive infrastructure and net-zero investments from public and private sources. After roti, kapda, makaan, bijli-sadak-paani, the focus has to extend to include 31 – innovations, investments, and institutional push, in human capital. Focus has to be on nutrition, high-quality delivery of healthcare, education and skills to realize rural potential.

India adds 15 GW solar capacity in January-June

India has seen record solar installations in the first half of 2024. It has added about 15 GW as developers have rushed to complete delayed projects. This has also surpassed previous records by a significant margin and evidenced 282% increase over 2023’s figures. Solar energy made up 19.5% of India’s installed power capacity by June 2024. And over 44% of total installed renewable energy capacity. As of June 2024, India’s cumulative installed solar capacity stood at 87.2 GW, of which the utility scale projects accounted for nearly 87% and rooftop solar over 13%. The average cost of large-scale projects was down by almost 26% YoY and 2% QoQ.

Road developers to see slower revenue growth of 5-7%

Road engineering, procurement and construction (EPC) companies are expected to see a moderate revenue growth of 5-7% next fiscal due to lower national highway awarding impacting their order books. Despite this, their credit profiles are expected to remain stable, supported by steady operating profitability and strong balance sheets. The slowdown in growth is attributed to various factors in including procedural issues and transition-related challenges as the government explores different project models. Prices of key raw materials have decreased providing some relief. As per CRISIL ratings, revenue growth will be impacted this fiscal and the next, after a compounded annual growth rate of 13% over the past 5 years. Ministry of Road and Highways (MoRTH) awarded an average of 12,500 km projects between fiscals 2022-23, but the number dropped to 8,581 km last fiscal, and is seen modest at 8,000 km this fiscal.

Indian Railways pacing towards Net Zero emissions

Indian Railways is rapidly progressing towards its goal of achieving net zero carbon emissions by 2030. The Railways is making efforts to grant net zero status to Railway premises across India. The Northeast Frontier Railway zone has achieved a significant milestone by converting its buildings to net zero carbon emission structures. Bureau of Energy Efficiency (BEE), under Ministry of Power, has honoured 6 different buildings of the zone with “Shunya Label” recognition as Net Zero Buildings. From 2014-2024, there has been a significant increase in renewable energy production capacity. Currently, over 1,950 railway stations across the country are powered by solar energy.

REC to provide Rs. 45,000 Crores finance to JNPA

REC Ltd. agreed to finance up to Rs. 45,000 Crores for various Jawaharlal Nehru Port Authority (Projects). It includes the Vadhavan Port development. The MoU of understanding was signed by REC Executive Director and JNPA Chairman. Union Minister Sarbananda Sonowal was also present to witness the agreement that outlined the partnership. REC Ltd. under the Ministry of Power is a leading NBFC. The MoU is to establish a framework for cooperation between JNPA and REC. JNPA implements projects in the infrastructure sector of its expertise, and REC shall provide the required funds.

Policy to extend lifespan of National Highways

The government announced a new policy for extending the lifespan of ageing national highways through ‘white-topping’. This method involves overlaying existing bituminous pavements with concrete. Expected benefits include reduced fuel consumption, lower maintenance costs, and increased pavement durability. The NHAI will focus on upgrading these highways within the financial year. Though there are several techniques and treatments available to strengthen flexible pavements, India has opted for thin white-topping technique. In this, concrete overlay is constructed on top of an existing in-service bituminous pavement. The thickness of the concrete layer is 100-200mm. The technique is extensively deployed in developed nations. This can extend the lifespan of pavements by 20-25 years.

Digitization of land records to boost investments in residential projects

Digitization of land records using GIS (Geographic Information System) technology is set to streamline land acquisition and attract investment in resurgent real estate sector. There is a recent surge in land acquisition interest from developers. In addition to mid and last-mile financing, we invest in residential developments at the early stages. Currently, early stage investments are limited to government-auctioned residential group housing land parcels, where title and entitlement risks are negligible. Land acquisition has become a challenge for developers and brokers recently, with multiple investors competing for same assets. The competition has driven land prices up by 30-50% over the past 3 years in key real estate markets in major cities. According to JLL India, in 2023, developers acquired total of 1,947 acres of land, valued at Rs. 32,203 crores in 111 separate deals. That is a 21% increase from previous year.

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